Top 5 09.27.13

TOP 5 HOT IDEAS

DATE: Friday Sept 27, 2013

Guidelines for Top 5 Trading:
Proactive –
Enter trade 20 minutes before data, 25 pip stop, 25 pip first target
Reactive – Enter trade 5 minutes after data release, 20 pip stop, 15 pip target

1. USD/JPY – Japanese National CPI



FUNDAMENTALS
YoY National CPI expected @ 0.8% (7:30 PM ET / 23:30 GMT)
Our View – Neutral
Reason – Neutral
If CPI grows by 0.3% or less = Buy USD/JPY
If CPI grows by 1% or more = Sell USD/JPY

Fighting deflation is a top priority for the Bank of Japan but the battle is slow with no major changes expected in Japanese CPI growth. Nonetheless Friday is a quiet day in the forex market and data that does not typically move a currency could have a surprisingly large reaction if the outcome deviates from expectations in a large enough way. In our opinion, Japan’s CPI report should only be traded reactively. If annualized CPI grows by 0.3%or less, USD/JPY can be bought for a move higher. If CPI grows by 1% or more, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

98.50 holds
99.00 still caps
99.50 key upside break in short term

USD/JPY has managed to stabilize at the 98.50 level but 99.00 still caps the upside and the pair needs to take out the 99.50 to gain upside traction.

2. EUR/CHF – KoF Leading Indicators

FUNDAMENTALS
KoF Leading Indicators expected @ 1.45 (3 AM ET / 7 GMT)
Our View – Neutral
Reason – Neutral
If the KoF index drops to 1.25 or lower = Buy EUR/CHF
If the KoF index exceeds 1.60 = Sell EUR/CHF

Switzerland’s KoF leading indicators report is not a huge market mover for EUR/CHF unless there is a significant surprise. As a result, the data is best traded reactively. If the KoF index drops to 1.25 or lower, EUR/CHF can be bought for a quick move higher. If the index exceeds 1.60, EUR/CHF can be sold. REACTIVE TRADE

TECHNICALS

2250 still continues to hold
2350 caps upside
Range persists

EUR/CHF still remains in a very tight range but continues to hold the 2250 level and support remains relatively stable at that level. A break there however could open a run towards 1.2100.

3. EUR/USD – Eurozone Economic Confidence

FUNDAMENTALS
EZ Economic Climate Index expected @ 96 (5 AM ET / 9 GMT)
Our View – Bullish EUR
Reason – IFO and PMI up, ZEW mixed
If the index is 98 or higher = Buy EUR/USD
If the index drops to 92 or lower = Sell EUR/USD

We have good reasons to believe that Eurozone economic confidence improved this month. While the ZEW survey was mixed, stocks headed higher, the IFO index of business sentiment ticked up along with the PMIs. As a result, we believe the data can be traded proactively or reactively. For those who choose to wait, if the index is 98 or higher, the EUR/USD can be bought for a move higher. If the index drops to 92 or lower, the EUR/USD can be sold for a reversal of recent gains. PROACTIVE or REACTIVE TRADETECHNICALS

1.3450-1.3550 range persists
Consolidation continues
Break either way could send the directional move

EUR/USD remains in a very tight range between 3450-3550 as it continues to consolidate with a break of either side key to near term direction.

4. USD/CAD – Average Hourly Earnings

FUNDAMENTALS
Average Weekly Earnings expected @ (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Neutral
If Average Weekly Earnings grows by less than 1.5% = Buy USD/CAD
If Average Weekly Earnings grows by 3.5% or more = Sell USD/CAD

Canada’s average weekly earnings report is not a huge market mover for the Canadian dollar unless there is a large surprise. So we feel that the only opportunity is to trade the data reactively. If earnings grow by less than 1.5%, USD/CAD can be bought for a move higher. If earnings growth exceeds 3.5%, USD/CAD can be sold. REACTIVE TRADE

TECHNICALS

1.0350 likely caps upside
1.0200 still deep support
Break above opens run to 1.0400

USD/CAD continues to inch higher, but a move towards 1.0350 likely caps the rally. A break above however opens a run towards 1.0450.

5. USD/JPY – Personal Income and Personal Spending



FUNDAMENTALS
Personal Income expected @ 0.4% & Personal Spending expected @ 0.3% (8:30 AM ET / 12:30 GMT)
Our View – Neutral
Reason – Average hourly earnings flat but retail sales increased
If Personal Income AND Spending exceeds 0.5% = Buy USD/JPY
If Personal Income AND Spending grows by 0% or less = Sell USD/JPY

This month’s personal income and spending numbers are difficult to handicap because average hourly earnings improved, pointing to a stronger number but retail sales fell, signaling weaker spending. As a result, the data should only be traded reactively. For those who choose to wait, if personal income and spending exceeds 0.5%, USD/JPY can be bought for a recovery trade higher. If personal spending and income grows by less than 0.0%, USD/JPY can be sold. REACTIVE TRADE

TECHNICALS

98.50 holds
99.00 still caps
99.50 key upside break in short term

USD/JPY has managed to stabilize at the 98.50 level but 99.00 still caps the upside and the pair needs to take out the 99.50 to gain upside traction.

USD/JPY maintains its mild downward bias but 98.50 holds for now. The pair faces resistance at 99.50 and strong support at 98.00

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